Yesterday China cut banking reserve levels to inject more cash into its financial system. Today Chinese stocks opened down 5%. Both are caused by the Trump-led trade war with China. Meanwhile, the economy in America 2.0 has seldom if ever been as strong.
No one outside of Trump World predicted this. All the experts thought it self-harming. Thus far the experts have been wrong, Trump right. China's economic health is much more dependent on trade with America 2.0 than vice versa.
If the trade war goes nuclear will this America 2.0 win/China lose trend continue? China exclusively possesses two arrows in its quiver and with the rest of the world jointly holds a third against which America 2.0 has no defense and that would, if fired, kill Americans, literally kill them.
The first is pharmaceuticals. America imports 96% of its pharmaceuticals from China. Cut those off and Americans will die.
The second is rare earth metals, essential to modern technology. China controls 90% of rare earths. Japan has recently found an apparent mother lode of rare earths that would end China's monopoly in the long term but in the near future if China stopped exporting rare earths to America American industry would stop.
The third is the asymmetric vulnerability of America to cyber attack. Everything from electrical grids to nuclear power plants to dams to the government is managed via computer. Any country in the world that wishes to harm America 2.0 and Americans can inflict catastrophe via cyber warfare that America 2.0 has woefully inadequate defense against.
Defense Secretary Jim Mattis is obsessed with August 1914 and how an inextricably intertwined Europe was not made invulnerable by its connectedness but rather more vulnerable, vulnerable to complete unraveling upon the slightest tug on a single seemingly insignificant strand. The tug came and the guns of August roared. Global free trade is premised on market efficiency: industry will locate in those countries where goods can be manufactured the cheapest and all of the world's consumers will benefit from the lower prices that result. Global market efficiency however knows no borders in a world still of nation states. Global free trade therefore, while benefiting the world economy, leads to asymmetric vulnerabilities in individual countries: to one-country monopolies on manufactures essential to another; to devastation of industry, like steel making, in one country by relocation to another; to an interconnectedness in the most wired countries that makes for broad, undefended national frontiers; to nation states and hence the world that are exquisitely sensitive to catasrophe when just one little wire is loose.
No one outside of Trump World predicted this. All the experts thought it self-harming. Thus far the experts have been wrong, Trump right. China's economic health is much more dependent on trade with America 2.0 than vice versa.
If the trade war goes nuclear will this America 2.0 win/China lose trend continue? China exclusively possesses two arrows in its quiver and with the rest of the world jointly holds a third against which America 2.0 has no defense and that would, if fired, kill Americans, literally kill them.
The first is pharmaceuticals. America imports 96% of its pharmaceuticals from China. Cut those off and Americans will die.
The second is rare earth metals, essential to modern technology. China controls 90% of rare earths. Japan has recently found an apparent mother lode of rare earths that would end China's monopoly in the long term but in the near future if China stopped exporting rare earths to America American industry would stop.
The third is the asymmetric vulnerability of America to cyber attack. Everything from electrical grids to nuclear power plants to dams to the government is managed via computer. Any country in the world that wishes to harm America 2.0 and Americans can inflict catastrophe via cyber warfare that America 2.0 has woefully inadequate defense against.
Defense Secretary Jim Mattis is obsessed with August 1914 and how an inextricably intertwined Europe was not made invulnerable by its connectedness but rather more vulnerable, vulnerable to complete unraveling upon the slightest tug on a single seemingly insignificant strand. The tug came and the guns of August roared. Global free trade is premised on market efficiency: industry will locate in those countries where goods can be manufactured the cheapest and all of the world's consumers will benefit from the lower prices that result. Global market efficiency however knows no borders in a world still of nation states. Global free trade therefore, while benefiting the world economy, leads to asymmetric vulnerabilities in individual countries: to one-country monopolies on manufactures essential to another; to devastation of industry, like steel making, in one country by relocation to another; to an interconnectedness in the most wired countries that makes for broad, undefended national frontiers; to nation states and hence the world that are exquisitely sensitive to catasrophe when just one little wire is loose.
